DOCSLIB.ORG

Lange's 1938 Model

Total Page：16

File Type：pdf, Size：1020Kb

Download full-text PDF Read full-text
Lange's 1938 Model Groupe de REcherche en Droit, Economie, Gestion UMR CNRS 7321 LANGE’S 1938 MODEL: DYNAMICS AND THE “OPTIMUM PROPENSITY TO CONSUME” Documents de travail GREDEG GREDEG Working Papers Series Michaël Assous Roberto Lampa GREDEG WP No. 2014-02 http://www.gredeg.cnrs.fr/working-papers.html Les opinions exprimées dans la série des Documents de travail GREDEG sont celles des auteurs et ne reflèlent pas nécessairement celles de l’institution. Les documents n’ont pas été soumis à un rapport formel et sont donc inclus dans cette série pour obtenir des commentaires et encourager la discussion. Les droits sur les documents appartiennent aux auteurs. The views expressed in the GREDEG Working Paper Series are those of the author(s) and do not necessarily reflect those of the institution. The Working Papers have not undergone formal review and approval. Such papers are included in this series to elicit feedback and to encourage debate. Copyright belongs to the author(s). Lange’s 1938 Model: Dynamics and the “Optimum propensity to consume” Michaël Assous* † Roberto Lampa‡ GREDEG Working Paper No. 2014-02 Introduction Oskar Lange’s 1938 work “The Rate of Interest and the Optimum Propensity to Consume” is widely recognized as one of the earliest mathematical models of Keynes’s General Theory. In light of its analytical content, it has usually been associated with the original IS-LM approach of Roy Harrod, James Meade and John Hicks (Young, 1987; Darity and Young, 1995). However, Lange’s article was not a reaction to Keynes’s works but the first part of an ambitious project that included the development of a theory of economic evolution1 (see Lampa 2013). Indeed, Lange manifested his interest in dynamics very early in his career (both his doctoral dissertation and his thesis presented for the ‘docent’ degree – i.e. assistant professor – were devoted to the analysis of the business cycle in Poland), repeatedly emphasizing the close connection between his view and Karl Marx’s ideas. Furthermore, he attached great importance also to the works of Joseph Schumpeter and Michal Kalecki2: from 1934 to 1936, he became tightly connected to the former at Harvard, whereas his interest in Kalecki’s business cycle seems to have grown more important after the publication of the General Theory3. * Corresponding author. Email: [email protected] † GREDEG (Groupement de Recherche en Droit, Economie et Gestion), Nice, France. Michael Assous benefited from support from the CNRS (GREDEG) and Duke University. ‡ CONICET (National Scientific and Technical Research Council) and University of Buenos Aires, Argentina 1 Although Lange explicitly suggested that his 1938 static model might have been dynamized, he never devised any mathematical demonstration: he just stated, en passant, that this might have been done by means of a time lag à la Kalecki4 (1937). It may be recalled, however, that in the early 1940s, Paul Samuelson devised some “techniques” in order to dynamize what he called the “Keynesian system” (1941: 113). As he explicitly affirmed in his 1941 Econometrica paper, “I shall analyze in some detail the simple Keynesian model as outlined in the General Theory. Various writers, such as Meade, Hicks, and Lange, have developed explicitly in mathematical form the meaning of the Keynesian system” (1941: 133). He then proceeded to develop two dynamic systems: both a differential and a difference set of equations and he presented the condition that assured the stability of the equilibrium (1941: 120). Although Samuelson explicitly referred to Lange, his models were only loosely related to his5. Firstly, Samuelson did not stress that the level of consumption was the key determinant of the investment function, as Lange repeatedly did. Secondly, and foremost, Samuelson paid no attention to the dynamics of the capital stock (which is the corner stone of Kalecki’s theory of fluctuations) to which Lange explicitly referred. On the other hand, it might also be remarked that Mabel Timlin (1942) made an attempt to dynamize what she had defined as the “Keynes-Lange” system. Her method mainly consisted of developing a “system of shifting equilibrium” to determine how a monetary shock was likely to induce a transformation in Lange’s set of structural functions, which were supposed to embed the “psychological-institutional complex” of the economy. Resorting to Lange’s diagrammatic representation, Timlin showed how expectations in both the goods and the financial market became critical elements with respect to the dynamics of the economy. Furthermore, by extending Lange’s analysis to the “long-run”, she was finally able to address the problem of the effects of a change in thriftiness upon the stationary level of the capital stock6. 2 Nevertheless, unlike Timlin and Samuelson, the present article focuses on Lange’s (crucial) notion of the “optimum propensity to consume”, whose importance is largely ignored in both the aforementioned analyses. In particular, the aim of this paper is to suggest a consistent reconstruction of Lange’s article in order to explore its potential implications in terms of dynamics. We are persuaded that such a reconstruction may be interesting from several perspectives. Firstly, it may help us to better understand how Lange’s notion of the “optimum propensity to consume” (on which he based his whole interpretation of the under-consumption theories) may operate in a dynamic context. Secondly and foremost, a similar reconstruction may be useful for making clear how close Lange’s view on dynamics – expressed in a series of articles published between 1934 and 1943 – was to the “Keynesian” dynamic approach of both Kalecki (1939) and Kaldor (1940) (according to Lange, the most prominent contributors of the late 1930s). Consequently, section 1 discusses Lange’s early reflection on dynamics with the aim of highlighting its most outstanding features. Section 2 focuses on Lange’s 1938 static model and indicates the effects of a change of saving on investment. Furthermore – by means of an unedited correspondence between Lange and Samuelson (dated 1942) recently discovered in the archives of Duke University by one of the authors – we clarify the meaning and the implications of the notion of “optimum propensity to consume”. Section 3, by means of some additional assumptions concerning the introduction of a time lag, outlines the necessary and sufficient conditions for the generation of self-sustaining cycles. Finally, Lange’s model (once dynamized) is compared to Kalecki’s 1939 business cycle theory, and its consistency with Lange’s view (expressed in a series of contemporary papers) is assessed. 1. The foundations of Lange’s endogenous dynamics: Marx and (a touch of) Schumpeter 3 According to a qualified judgement, the study of business cycles and the evolution of capitalism were Lange’s chief research concerns from his early youth until the end of the Second World War (Kowalik 2008). This notwithstanding (and paradoxically enough), Lange did not publish any work explicitly dealing with these issues in the aforementioned period7. However, it is possible to reconstruct the essentials of his reflection on dynamics by means of a careful re- reading of his main articles. In “Marxian Economics and Modern Economic Theory” (1935), Lange advocated for an approach that could explain the “economic evolution” from “within” the economic process. In this field, Modern Economic Theory was most likely to be misleading8. Lange’s argument was that by resorting to a static theory of equilibrium, “bourgeois economists” – that is, all the economists ranging from the Austrian, Marshallian and the Lausanne schools – were unable to depart from a framework in which all data related to preferences, institutions and technology are supposed to be given so that the only possible explanation to fluctuations and crises was an exogenous one. In Lange’s eye, this line of thought was likely to consolidate the unrealistic view that capitalist economies were intrinsically stable, whereas the 1930s contingency showed their destructive instability both in the United States and in Europe. Sarcastically enough, Lange wrote: “It was very generally held among “bourgeois” economists both at the beginning of the twentieth century and in the years preceding 1929, that the economic stability of Capitalism was increasing and that business fluctuations were becoming less and less intense. Thus the Marxian claim that “bourgeois” economists failed to grasp the fundamental tendencies of the evolution of the Capitalist system proves to be true.” (Lange, 1935: 190) However, it must bemarked that the “real” superiority of Marxian economics was not supposed to stem from any specific analytical tool originally used by Marx. Firstly, Lange considered that the labour theory of value, at best, can explain equilibrium’s price and production, once a given 4 amount of labour necessary to produce a commodity is known. On the other hand, it is of no use to highlight how changes (particularly, technological changes) occur. (Lange 1935: 194) Secondly, he thought that also the original version of Marx’s schemes of reproduction were of little help in the field of business cycle, because of its analytical backwardness9: “The inability of Marxian economics to solve the problem of the business cycle is demonstrated by the considerable Marxist literature concerned with the famous reproduction schemes of the second volume of Das Kapital. This whole literature tries to solve the fundamental problems of economic equilibrium and disequilibrium without even attempting to make use of the mathematical concept of functional relationship.” (Lange 1935: 196) The alleged superiority of Marxian economics laid instead on the exact specification of the institutional datum within which the economic process was studied. Its merit, in particular, was to study the functioning of an economy made of two main social classes: “[…] the consequences of the additional institutional' datum which distinguishes Capitalism from other forms of exchange economy, i.e. the existence of a class of people who do not possess any means of production, is scarcely examined.
Load more

Recommended publications
  • Oskar Lange's Conversion to Keynesian Economics
    Oskar Lange’s Conversion to Keynesian Economics Goulven Rubin Outline : In the first half of the 1940s, Oskar Lange’s view of capitalism evolved markedly. In 1934 he was persuaded that capitalism was doomed and that the capitalist State could not save it. Because of imperfect competition, prices and wages could not adjust as they should. In “Say’s law: a restatement and criticism” (1942) and in a Cowles Commission monograph entitled Price Flexibility and Employment (1945), Lange developed a totally different view. He adopted the claim developed in John Maynard Keynes’ chapter 19 according to which downward wage adjustment could not restore full employment. This led him to revise his conception of the State and defend the possibility of a mixed economy. His new vision was grounded by a general equilibrium approach borrowed to John R. Hicks. Our paper tries to document Lange’s evolution from 1934 to 1945. We also discuss the influence and the significance of Price, Flexibility and Employment. This book was instrumental in imposing the idea that the foundations of Keynes’ claims should be sought in the general equilibrium theory. It may be seen as a bifurcation with respect to the approach of microfoundations suggested by Hicks in Value and Capital. Keywords: History of macroeconomics, Microfoundations, Oskar Lange, John Hicks, Neoclassical Synthesis, Walrasian Macroeconomics. LEM-CNRS (UMR 9221) and University of Lille ; postal address: Faculté des Sciences Juridiques, Politiques et Sociales, 1, Place Déliot, 59000 Lille; email address: [email protected]. 1 1. Introduction Potted histories of macroeconomics often present the current state of the field as the result of a care for microfoundations that would have been totally lacking before the works of Lucas and his disciples during the seventies.
    [Show full text]
  • Lange's 1938 Model: Dynamics and the "Optimum Propensity to Consume"
    A Service of Leibniz-Informationszentrum econstor Wirtschaft Leibniz Information Centre Make Your Publications Visible. zbw for Economics Assous, Michael; Lampa, Roberto Working Paper Lange's 1938 model: dynamics and the "Optimum propensity to consume" CHOPE Working Paper, No. 2014-02 Provided in Cooperation with: Center for the History of Political Economy at Duke University Suggested Citation: Assous, Michael; Lampa, Roberto (2014) : Lange's 1938 model: dynamics and the "Optimum propensity to consume", CHOPE Working Paper, No. 2014-02, Duke University, Center for the History of Political Economy (CHOPE), Durham, NC This Version is available at: http://hdl.handle.net/10419/149714 Standard-Nutzungsbedingungen: Terms of use: Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Documents in EconStor may be saved and copied for your Zwecken und zum Privatgebrauch gespeichert und kopiert werden. personal and scholarly purposes. Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle You are not to copy documents for public or commercial Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich purposes, to exhibit the documents publicly, to make them machen, vertreiben oder anderweitig nutzen. publicly available on the internet, or to distribute or otherwise use the documents in public. Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, If the documents have been made available under an Open gelten abweichend von diesen Nutzungsbedingungen die in der dort Content Licence (especially Creative Commons Licences), you genannten Lizenz gewährten Nutzungsrechte. may exercise further usage rights as specified in the indicated licence. www.econstor.eu Lange’s 1938 model: dynamics and the “Optimum propensity to consume” by Michaël Assous Roberto Lampa CHOPE Working Paper No.
    [Show full text]
  • An Anarchist FAQ — Section I Contents
    An Anarchist FAQ — Section I Contents Section I: What would an anarchist society look like? 4 I.1 Isn’t libertarian socialism an oxymoron? 12 I.1.1 Is socialism impossible? ................................ 17 I.1.2 Is libertarian communism impossible? ........................ 27 I.1.3 What is wrong with markets anyway? ........................ 39 I.1.4 If capitalism is exploitative, then isn't socialism as well? . 45 I.1.5 Does capitalism efficiently allocate resources? .................... 48 I.2 Is this a blueprint for an anarchist society? 62 I.2.1 Why discuss what an anarchist society would be like at all? . 66 I.2.2 Will it be possible to go straight to an anarchist society from capitalism? . 68 I.2.3 How is the framework of an anarchist society created? . 72 I.3 What could the economic structure of anarchy look like? 79 I.3.1 What is a "syndicate"? ................................. 83 I.3.2 What is workers' self-management? ......................... 90 I.3.3 What does socialisation mean? ............................ 96 I.3.4 What relations would exist between individual syndicates? . 102 I.3.5 What would confederations of syndicates do? . 106 I.3.6 What about competition between syndicates? . 113 I.3.7 What about people who do not want to join a syndicate? . 118 I.3.8 Do anarchists seek "small autonomous communities, devoted to small scale produc- tion"? .......................................... 119 I.4 How would an anarchist economy function? 123 I.4.1 What is the point of economic activity in anarchy? . 127 I.4.2 Why do anarchists desire to abolish work? . 129 I.4.3 How do anarchists intend to abolish work? .
    [Show full text]
  • The Socialist Calculation Debate and New Socialist Models in Light of a Contextual Historical Materialist Interpretation
    THE SOCIALIST CALCULATION DEBATE AND NEW SOCIALIST MODELS IN LIGHT OF A CONTEXTUAL HISTORICAL MATERIALIST INTERPRETATION by Adam Balsam BSc [email protected] Supervised by Justin Podur BSc MScF PhD A Major Paper submitted to the Faculty of Environmental and Urban Change in partial fulfillment of the requirements for the degree of Master in Environmental Studies York University, Toronto, Ontario, Canada December 11, 2020 Table of Contents The Statement of Requirements for the Major Paper ................................................................................. iii Abstract ........................................................................................................................................................ iv Foreword ...................................................................................................................................................... vi Section I: Introduction, Context, Framework and Methodology .................................................................. 1 Preamble ............................................................................................................................................... 1 Introduction .......................................................................................................................................... 4 Context of this Investigation ................................................................................................................. 5 The Possibilities of Socialist Models ..................................................................................................
    [Show full text]
  • Socialism, Economic Calculation And
    SOCIALISM, ECONOMIC CALCULATION AND ENTREPRENEURSHIP BY Jesús Huerta de Soto TABLE OF CONTENTS CHAPTER I: INTRODUCTION ............................................................................. 1 1. SOCIALISM AND ECONOMIC ANALYSIS .................................................... 1 The Historic Failure of Socialism ........................................................................ 1 The Subjective Perspective in the Economic Analysis of Socialism ................... 3 Our Definition of Socialism ................................................................................. 4 Entrepreneurship and Socialism ........................................................................... 5 Socialism as an Intellectual Error ......................................................................... 6 2. THE DEBATE ON THE IMPOSSIBILITY OF SOCIALIST ECONOMIC 7 CALCULATION .................................................................................................. Ludwig von Mises and the Start of the Socialism Debate .................................... 7 The Unjustified Shift in the Debate toward Statics .............................................. 8 Oskar Lange and the “Competitive Solution” ...................................................... 9 “Market Socialism” as the Impossible Squaring of the Circle ............................. 9 3. OTHER POSSIBLE LINES OF RESEARCH ..................................................... 10 1. The Analysis of So-called “Self-Management Socialism” ............................. 10 2. “Indicative
    [Show full text]
  • The Question of Rational Economic Calculation in Market Socialism
    The Question of Rational Economic Calculation in Market Socialism Diplomarbeit zur Erlangung des akademischen Grades Magister der Sozial- und Wirtschaftswissenschaften im Diplomstudium Wirtschaftswissenschaften Eingereicht von: David Hebesberger Angefertigt am: Institut für Volkswirtschaftslehre BeurteilerIn: O. Univ.-Prof. Mag. Dr. Reinhard Neck (Alpen-Adria-Universität Klagenfurt) Linz, November 2015 The Question of Rational Economic Calculation in Market Socialism David Hebesberger Eidesstattliche Erklärung: Ich erkläre an Eides statt, dass ich die vorliegende Diplomarbeit selbständig und ohne fremde Hilfe verfasst, andere als die angegebenen Quellen und Hilfsmittel nicht benutzt bzw. die wörtlich oder sinngemäß entnommenen Stellen als solche kenntlich gemacht habe. Die vorliegende Diplomarbeit ist mit dem elektronisch übermittelten Textdokument identisch. Linz, 2015 II The Question of Rational Economic Calculation in Market Socialism David Hebesberger Abstract Many of those familiar with the economic calculation debate between the economists of the Austrian school of economics and proponents of socialism understand it to have been won by the socialists due to Oskar Lange’s model of market socialism, also known as the Lange model. Such an interpretation of the debate, however, is rooted in a misinterpretation of Austrian arguments which did thus remain unanswered, leaving the debate unfinished until today. Due to this misinterpretation of Austrian arguments and consequently the debate, this thesis investigates the question of rational economic calculation in Oskar Lange’s model of market socialism from the perspective of the Austrian school of economics. For this purpose, the works of the Austrian economists Ludwig von Mises, Friedrich Hayek, and in a somewhat lower quantity also Lionel Robbins concerning knowledge and the market shall be investigated.
    [Show full text]
  • Toward a Socialism for the Future
    TOWARD A SOCIALISM FOR THE FUTURE: IN THE WAKE OF THE DEMISE OF THE SOCIALISM OF THE PAST' Thomas E. Weisskopf Department of Economics University of Michigan October 1991 *This paper grew out of my involvement for the past two years in lively and wide-ranging discussions of Marxism and socialism over the Progressive Economists' Network (PEN) for electronic computer correspondence. I am grateful to countless PEN participants for their engagement in these discussions; and I would like to mention in particular my indebtedness to Michael Lebowitz for his role in a series of stimulating debates. I am also grateful to Sam Bowles, David Kotz, and participants in Michael Reich's political economy seminar at the University of California, Berkeley, for constructive comments on earlier drafts of this paper. I remain, of course, solely responsible for the views expressed here. ABSTRACT In this paper I seek to explore what kind of socialist system can best make good on the socialist commitment to equity; democracy and solidarity -- in the wake of the failure of the political-economic systems of the USSR and Eastern Europe. I identify and explore two alternative models of socialism -- market socialism and participatory socialism -- and conclude by endorsing a form of democratic self-managed market socialism. Jntroduction What is socialism really all about? The revolutionary events of 1989 in Eastern Europe, and the enormous changes that have been taking place in the Soviet Union since then, have raised this question with renewed acuity. The idea of socialism developed historically out of opposition to the reality of capitalism.
    [Show full text]
  • New Market Socialism: a Case for Rejuvenation Or Inspired Alchemy?
    NEW MARKET SOCIALISM: A CASE FOR REJUVENATION OR INSPIRED ALCHEMY? DIMITRIS MILONAKIS * ÍNDICE I. INTRODUCTION............................................................................................................................................. 2 I. EARLY MARKET SOCIALISM: THE LANGE MODEL ................................................................................... 4 II. MARKET SOCIALISM AND THE QUESTION OF KNOWLEDGE: THE AUSTRIAN CHALLENGE ............. 6 III. THE QUESTION OF INCENTIVES: MARKET SOCIALISM AND ‘NEW INFORMATION ECONOMICS’.... 7 IV. MODERN VERSIONS OF MARKET SOCIALISM ..................................................................................... 10 V. NEW MARKET SOCIALISM: A CRITIQUE FROM WITHIN........................................................................ 14 VI. TOWARDS A MORE RADICAL CRITIQUE ............................................................................................... 17 VII. BY WAY OF CONCLUSION...................................................................................................................... 21 VIII. REFERENCES ......................................................................................................................................... 22 *Department of Economics, University of Crete. I would like to thank Ben Fine for his painstaking critique of an earlier draft of this paper. My thanks also go to Costas Lapavitsas, George Argitis, the participants of the Fourth Annual Conference of the European Society for the History of Economic Thought,
    [Show full text]
  • Friedrich Von Hayek: the Socialist-Calculation Debate, Knowledge Arguments, and Modern Economic Development Cara Elliott
    Volume 5 Article 6 2011 Friedrich von Hayek: The oS cialist-Calculation Debate, Knowledge Arguments, And Modern Economic Development Cara A. Elliott Gettysburg College Class of 2011 Follow this and additional works at: https://cupola.gettysburg.edu/ger Part of the Economic History Commons, Economic Policy Commons, Economic Theory Commons, International Economics Commons, Macroeconomics Commons, Political Economy Commons, and the Public Economics Commons Share feedback about the accessibility of this item. Elliott, Cara A. (2011) "Friedrich von Hayek: The ocS ialist-Calculation Debate, Knowledge Arguments, And Modern Economic Development," Gettysburg Economic Review: Vol. 5 , Article 6. Available at: https://cupola.gettysburg.edu/ger/vol5/iss1/6 This open access article is brought to you by The uC pola: Scholarship at Gettysburg College. It has been accepted for inclusion by an authorized administrator of The uC pola. For more information, please contact [email protected]. Friedrich von Hayek: The oS cialist-Calculation Debate, Knowledge Arguments, And Modern Economic Development Abstract At the close of the nineteenth and the commencement of the twentieth century, socialism began to gain momentum as a large-scale movement in Europe and the United States. This popularity was supported by an increased influence of the working class in society, which put pressure for representation upon European parliaments and began to secure concrete improvements in labor protection laws. Moreover, socialist proponents looked hopefully towards the living example of the Soviet Union, which began its socialist experiment in 1917 following the success of the Bolshevik Revolution. Socialism, which found its economic grounding in the legacies of such men as David Ricardo and Karl Marx, tended to encourage a more central and vital role for government intervention in the economy.
    [Show full text]
  • Market Socialism and Economic Calculation
    ARGUMENTA OECONOMICA No 1 (32) 2014 PL ISSN 1233-5835 Mateusz Machaj* MARKET SOCIALISM AND ECONOMIC CALCULATION ∗ The purpose of this paper is to examine unappreciated criticism of the market socialism model that was developed in the 1930s during the Socialist Calculation Debate. Our aim is to present two related theses: (1) market socialism is not different from the “standard” version of socialism, and as a consequence of that (2) no type of socialism can mimic capitalist market process. The first section briefly summarizes the importance and misunderstandings of the market socialism model. The second section discusses its omitted criticism. The third section contrasts calculation under market socialism with calculations under a capitalist regime. The last section presents concluding comments. Keywords: socialist calculation debate, markets, economic systems JEL: B13, D02, P51 1. SOCIALIST CALCULATION DEBATE AND MARKET SOCIALISM The Socialist Calculation Debate has been subjected to many revisits, reinterpretations and various analyses. The literature is full of many coherent and rich considerations extending the topic far beyond socialism itself (see comprehensive overview in Lavoie 1981). If someone wanted to investigate all the arguments and counter-arguments about the possibility of socialism, this would appear as a very difficult, if not impossible task. Two primary publications remain the most important: Ludwig von Mises’s presentation of the problem, and Oskar Lange’s response, who was a leading defender of socialism in the spirit of the neoclassical economic tradition. Mises’s argument ([1920]1990) was an original (yet, as in many original works, undeveloped) approach to unite two distinct social disciplines, law and economics.
    [Show full text]
  • Oskar Lange and the Influence of Walrasian Theory During the Keynesian Revolution Goulven Rubin
    Oskar Lange and the influence of Walrasian theory during the Keynesian revolution Goulven Rubin To cite this version: Goulven Rubin. Oskar Lange and the influence of Walrasian theory during the Keynesian revolution. 2011. halshs-00817758v2 HAL Id: halshs-00817758 https://halshs.archives-ouvertes.fr/halshs-00817758v2 Preprint submitted on 29 Apr 2013 HAL is a multi-disciplinary open access L’archive ouverte pluridisciplinaire HAL, est archive for the deposit and dissemination of sci- destinée au dépôt et à la diffusion de documents entific research documents, whether they are pub- scientifiques de niveau recherche, publiés ou non, lished or not. The documents may come from émanant des établissements d’enseignement et de teaching and research institutions in France or recherche français ou étrangers, des laboratoires abroad, or from public or private research centers. publics ou privés. Paper for the ESHET conference 2011 Bogazici University, Turkey Oskar Lange and the influence of Walrasian theory during the Keynesian revolution ♦ Goulven Rubin ♦♦ ♦ Maître de conférence, University of Paris 8 and LED, email: [email protected]. 1 1. Introduction The growing reference to the Walrasian theory is a striking feature of the history of contemporary macroeconomics. This is particularly paradoxical as far as Keynesian theory is concerned. Keynes was trained as a Marshallian economist and, except for its general equilibrium perspective, the model of his 1936 General Theory had nothing to do with Walras’ work. Yet, a few years after the publication of Keynes’ book, a number of economists began to present his model as a particular case of the Walrasian model. This idea appeared in Klein (1947) or in Modigliani (1944) for instance.
    [Show full text]
  • 119. Towards a Re-Interpretation of the Economics of Feasible Socialism
    TOWARDS A RE-INTERPRETATION OF THE ECONOMICS OF FEASIBLE SOCIALISM Dic Lo Department of Economics, SOAS, University of London Email: [email protected] and Russell Smyth Department of Economics, Monash University Email: [email protected] February 2002 1 TOWARDS A RE-INTERPRETATION OF THE ECONOMICS OF FEASIBLE SOCIALISM ABSTRACT This paper re-examines the debate on whether socialism is feasible from the perspective of the literature on the division of labour and organisational forms. Our central argument is twofold. First, each of the major protagonists in the debate provide a partial explanation as to when market socialism, planned socialism and participatory socialism are feasible. Second, the different perspectives on when socialism is feasible can be reconciled through seeing the arguments in terms of specific techno-economic paradigms, which are underpinned by their own concepts of the division of labour and efficiency attributes. We will show that theories on the economics of socialism reflect different techno-economic paradigms and that when, and whether, the various views on socialism are appropriate depend on the prevailing external conditions, economic growth path and existing mode of institutional arrangement. KEYWORDS Division of Labour, Organisational Forms, Socialism, JEL CLASSIFICATIONS B2, P3 1 2 1. Introduction In contrast to the world wide collapse of Soviet-type socialism and the failure of earlier experiments with market socialism in countries such as Hungary and Yugoslavia, discussion on the economics of socialism has enjoyed an intellectual renaissance since the 1980s. As Auerbach et al (1988, p. 61) put it: “The question of socialism is once more in the air”.
    [Show full text]